Oil News: Election Fallout, Strong Dollar Challenge Oil Demand and Prices

Oil Prices Drift Lower as Election Fallout Weighs on Market

Crude oil prices edged lower Thursday as West Texas Intermediate (WTI) futures traded near $71.05. Investors face a neutral market near a 50% retracement level at $71.63, indicating potential rangebound action as traders await a decisive move above $71.63 or below $69.21.

At 11:26 GMT, Light Crude Oil Futures are trading $70.91, down $0.78 or -1.09%.

Dollar Strength and Election Fallout Pressure Oil Markets

Oil has remained under pressure since the recent U.S. presidential election, initially experiencing a $2 sell-off following the dollar’s rally. The dollar’s strength, holding near four-month highs, continues to weigh on crude demand by making it pricier for international buyers. Upcoming Federal Reserve decisions could further impact the dollar, potentially affecting crude’s appeal in the short term.

In China, a decline in crude imports, down 9% year-over-year in October, adds to demand concerns. This marks the sixth consecutive month of falling imports, with softening demand from China—a significant global consumer—raising concerns about the broader demand outlook.

Potential Sanctions on Iran and Venezuela Pose Supply Risks

On the supply side, potential geopolitical actions are keeping traders cautious. Market analysts suggest that Trump’s return to “maximum pressure” sanctions could restrict Iranian oil exports by up to 1 million barrels per day (bpd), while Venezuelan sanctions, briefly eased under the Biden administration, may be re-imposed. Both measures would tighten global oil supply if fully enforced.

In the U.S. Gulf, Hurricane Rafael has shut down about 17% of oil output, approximately 304,418 bpd, per the Bureau of Safety and Environmental Enforcement. Though temporary, these disruptions contribute to a support floor for oil prices in an otherwise bearish landscape.

Rising U.S. Inventories and Lower Exports Weigh on Prices

According to the latest Energy Information Administration (EIA) data, U.S. crude inventories rose by 2.1 million barrels last week to 427.7 million, exceeding forecasts. Higher stock levels are partly attributed to a 1.4 million bpd drop in exports, lifting net imports by 1.7 million bpd. Gasoline stocks rose by 412,000 barrels, while distillates increased by 2.9 million barrels, against predictions of a decline.

Even as petroleum product exports reached a record 7.6 million bpd, weak domestic demand saw implied oil consumption fall to 19.7 million bpd, down 1.9 million from the previous week. Refinery utilization climbed to 90.5% capacity, but without translating into increased domestic demand.

Market Forecast: Short-Term Bearish Trend Likely for Crude Oil

Crude prices face a bearish outlook in the short term. Downward pressures from the strong dollar, weak Chinese demand, and high U.S. inventories are expected to push prices toward support at $69.21. While potential sanctions and supply disruptions provide some support, without a significant bullish catalyst, prices will likely remain under pressure, struggling to surpass resistance at $71.63.